Pakistan's flood-hit economy set for major trade boost from EU Commission proposal

Pakistan's economic recovery following the unprecedented devastation from flooding earlier this year is set to receive significant support from the EU through key trade preferences. The European Commission today adopted a proposal for unilateral suspension of import duties on a number of important export items from Pakistan. The proposed preferences would liberalise 75 tariff lines on imports from Pakistan accounting for 27% of Pakistan's current imports to the EU. This would yield an increase in EU imports from Pakistan of about € 100 million. These preferences would be available for the next three years. Given the nature of Pakistan's industrial and export base, a large number of the products for liberalisation include textiles but there are also other industrial products such as ethanol. In drawing up this proposal at the request of the EU Member States (European Council), the Commission has taken into account both industrial sensitivities in the EU and those of partners in the WTO.

EU Trade Commissioner Karel De Gucht stated, "I am very pleased that there is full support for this proposal which is designed to maximise the benefits for the people of Pakistan after the devastating flood. This proposal will offer a real boost to Pakistan's economic recovery while at the same time take into account sensitivities of EU industries. This economic assistance comes on top of the EU's significant humanitarian and development aid and shows just how effective the EU can be in offering critical assistance to its global partners."

The Commission will present its proposal to Member States and European Parliament in the coming days. The EU would then submit a request for a WTO waiver allowing for the suspension of duties on important imports from Pakistan.

Background

The European Council of 16 September 2010 "mandated" the Commission to present in October a proposal to unilaterally suspend, for a limited period of time, duties on important imports from Pakistan.

The selection of products for potential liberalisation follows the European Council request in that this liberalisation should represent an ambitious trade measure essential to Pakistan's economic recovery and growth while at the same time take into account sensitivities of EU industries.

A list of 75 dutiable products lines of importance for Pakistan's exports has been established. The selected product lines amount to almost € 900million in import value, accounting for about 27% of our imports from Pakistan (€ 3.3 billion). Liberalising these 75 lines, of which one product line (ethanol) would be subject to an annual tariff rate quota of 100 000 tonnes based on past imports, would result in an estimated increase in EU imports from Pakistan of around € 100 million per year compared to 2009, while lowering tariff revenue for the EU budget by nearly € 80 million. This increase in EU imports is relatively small given the current overall value of imports of these products of close to € 15 billion, out of which nearly € 4 billion already enters the EU free of duties). Direct or indirect effects on employment will be limited given that the increase in imports is low compared to current level of EU production (0.5%), and would also be compensated by gains through lower prices on the imported items.

The EU is Pakistan's major trade partner (worth € 7.6 billion) followed by the United Arab Emirates (€ 5.3 billion), China (€ 5.1 billion), Saudi Arabia (€ 4.3 billion), while the US ranks 5th ($ 3.8 billion). Its main export items are textiles and clothing products (more than 60% of its exports).

For further information

Declaration on Pakistan in Council Conclusions from 16 September 2010 (p. 10)